Dominant Power Generators Bat to Keep EPIRA Law with only minor changes.

Posted on: Jun 28, 2017

David Celestra Tan, MSK
25 June 2017

Should the EPIRA Law of 2001 be Implemented fully with only some minor provisions? Or should it be totally amended or even repealed as called for by the Party-list group Bayan Muna and various consumer groups?

On one end of the spectrum are the lucky vested interests that benefited handsomely from the massive transfer of government generating assets at firesale prices to a chosen few who were in the position to take advantage under the rules of the Epira Law. The same groups are profiting handsomely from the high electric rates resulting from self-negotiated rates, porous rate setting regulation, unbridled cross ownership, and  loosewesm rules.

On  the extreme opposite are the Filipino people either as taxpayers or electric consumers who are shouldering the heavy load of the unpaid debts of the PSALM after they ironically have fully paid for the take or pay BOT contracts of those power plants. As electric consumers, they are paying the resulting high electric rates.

The answer to the question of whether the EPIRA law must be amended or retained as is depends on which end of the cost-benefit spectrum you fall since the implementation of the Epira Law  16 years ago.

Let the EPIRA Good times roll!

As offshoots from a recent “Powering the Philippines” forum, the dominant power generators have comeout pushing for urgent and continued implementation of the current EPIRA to assure power supply for the future, calling for faster implementation of projects.

A technology supplier to the power generators is claiming P51 billion a year in savings from more investments in power. These “industry stakeholders observed more private-sector involvement in the energy industry, ushering in new power projects that boosted the country’s power supply, ultimately benefiting consumers.”

“ There is a lot of power projects that came on stream for the last three or four years and a lot of capacity still coming on stream.”  (no argument there).

Another dominant group said “Epira has been very effective. The government is no longer guaranteeing take or pay contracts. It also has freed balance sheet so it can use resources for other areas of development. PRICES HAVE COME DOWN. We now have ample supply. Plants that were privatized have now been rehabilitated and now more efficient and reliable” (mostly true except the dubious claim that “prices have come down”.)

Another conglomerate said “Epira has demonstrated how open competition helps lower power prices”. Epira should be fully implemented soon, especially the WESM in Mindanao and RCOA at household level”

The country’s dominant coal conglomerate said “some of the goals of the Epira cannot be felt now. Regulatory bodies like Energy Regulatory Commission are not stable, electricity prices yet to be optimized due to effect of take-or-pay contracts still in effect, SPUG areas need accelerated program of development”

Meralco for its part predictably chimed in “the Epira has encouraged competition especially in the power generation business. The law also increased efficiencies in distribution as evidenced by all-time low systems loss levels”.  

(Can you believe these guys saying these with a straight face? We mean, Meralco just negotiated without competition 4,000mw of power supply with five chosen generators as strategic partners, committing 80% of their energy needs for the next 20 years).

The power generation association PIPPA  had been espousing that the “EPIRA law should be allowed to stay the course and prove its benefits”.  Never mind that 16 years after the generation sector is consolidated to a chosen few revolving around the two main power distribution utilities group, Meralco and the Aboitiz Group of Cebu and Davao. The three metropolitan areas distribute 70% of the national electricity consumption.

If you are one of these blessed groups, obviously you would not want the gravy train upset. You control the distribution sector and the power market that it represents. You can form your own power generating companies and negotiate long term power supply contracts with yourself or strategic partners that who also control. You get sweetheart prices and terms. All courtesy of the loopholes of the Epira Law section 45 and Epira IRR Rule 11.  When the consumers or any conscience driven person complains, you create a power shortage scenario with a few brownouts thrown in. Then your friendly legislators and government officials scamper to get your projects approved.  Never mind that they did not go through bidding. You get away with everything.  Just another day in the office and you laugh all the way to the bank.

How about the Electric Consumers?

They have been feeling the pain of the high power rates. But the power oligarchs are so powerful and make so much money, consumers are brainwashed into thinking that the rates are fair and reasonable. They are made numb to the issue by media disinformation. Consumers pay up otherwise their electric service is disconnected. 

Things will not change unless someone powerful enough will step up. So far the ERC had not done enough, choosing to carryover the anti-consumer rules adopted by the trapo-politican Chairmen despite the evident resulting disaster to the consumers.  The current good commissioners are buried in the internal strife at ERC and the challenges of digging up all the surprise deals reportedly made by their former head.  Yet these commissioners may have to suffer the fall out of the crisis in integrity at the regulatory agency that needs to have full public trust.

The EPIRA law is supposed to achieve two things: ample power supply and fair and reasonable rates.

Since the power crisis of 1990’s the power industry’s battle cry had been“assuring power supply”.  Or its variation “the most expensive power is not having power”. When that happens you know that power rate is not a priority and it certainly will be going up. Supply contracts were mostly negotiated.

The dominant distributors cum generators have been having it so good.  Now they are campaigning to preserve the status quo of the Epira law and let the good times roll.

It is time for the country to focus on achieving fair and reasonable rates. It is the turn of the consumers to benefit and be treated fairly under the Epira Law.

MSK had filed for petitions for the modification of the PBR rate making methodology that effectively deregulated the profits of the distribution sector. ERC’s rules on systems loss recovery and computations are non-transparent.  Power generation contracts that are passed on to the consumers need to undergo a resolute implementation of the CSP policy.  Why did we postpone it for six months, allowing the elephants to rampage through the gate and ravage the consumers?

The current impasse (at least on the surface) on Meralco’s seven (7) midnight contracts of 3,551mw will soon quickly degenerate into a power crisis threat to the public . The cartel of MeralcoPowerGen and their five chosen generator partners who would control 10,000mw of the country’s installed capacity of 16,000mw. Cartelization which is unequivocally abhorred by the Epira law is clearly on the horizon.

Consumer Aproar

Consumer groups are calling these as midnight contracts. The Alyansa para saBagongPilipinas (ABP) filed a petition for injunction at the Supreme Court asking that the ERC extension of the CSP be declared against the public interest and made null and void. ABP also filed an administrative and criminal complaint with the Office of the Ombudsman against the ERC Commissioners for abuse of discretion and dereliction of duty. Party-list Bayan Muna launched a congressional investigation into the seven (7) midnight contracts. The MatuwidnaSingilsaKuryente Consumer Alliance Inc (MSK) for its part petitioned the ERC to suspend hearings on the Meralco applications and investigate first whether the seven projects totaling 3,551mw plus the 480mw Meralco signed with the San Bernardino project constituted market power abuse, anti-monopoly, and will result to cartelization as is the regulatory agency’s motuproprio duty as section 43 of the Epira law.

Things are Ominously Quiet

In the face of these irregularities, neither the ERC or DOE had stepped up. Meanwhile, it is ominous that the proponents of the questionable projects continue to announce the signing of their various construction contracts.  It seems they know something we don’t. 

If we have to guess, it seems the impasse on Meralco’s mid night contracts will be allowed to degenerate into a power crisis in a matter of months and then the energy officials including the legislators will be put into a corner afraid to be blamed by the public and the media  for obstructing power development.  Same “power crisis gambit” from the early 1990’s.Now 25 years later, the old trick is still being perpetuated upon the hapless consumers.  Why is there a seeming conspiracy against the Filipino electric consumers? 

The media campaign of the dominant generators appear to be part of this gameplan.

The more things change, the more they stay the same.

MatuwidnaSingilsaKuryente Consumer Alliance Inc.


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